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Treasuries Pull Back Sharply Amid Signs Of Progress In Trade Talks

Treasuries moved sharply lower over the course of the trading day on Thursday, more than offsetting the rebound seen in the previous session.

Bond prices climbed off their worst levels in afternoon trading but remained firmly negative. As a result, the yield on the benchmark ten-year note, which moves opposite of its price, jumped 11.2 basis points to 1.926 percent.

With the substantial increase on the day, the ten-year yield ended the session at its highest closing level in over three months.

The sell-off by treasuries came after a spokesman for the Chinese Commerce Ministry said the U.S. and China have agreed to lift existing tariffs in phases.

"The trade war started with tariffs and should end with the cancellation of tariffs," said ministry spokesman Gao Feng, who noted phase one of a trade deal must include both countries simultaneously canceling tariffs on each other's goods.

The U.S. has widely been expected to scrap tariffs on about $156 billion worth of Chinese imports currently set to take effect on December 15th as part of phase one.

"Both sides have agreed to cancel additional tariffs in different phases, as both sides make progress in their negotiations," Gao added without providing a timetable.

The latest news helped offset the negative sentiment generated by yesterday's report from Reuters indicating a meeting between President Donald Trump and Chinese President Xi Jinping could be delayed until December.

A senior Trump administration official told Reuters discussions continue over terms of phase one of the trade deal and a venue for a meeting between Trump and Xi.

Sites in Europe and Asia have been suggested for the meeting, with Sweden and Switzerland among the possibilities, while Trump's suggestion of Iowa appears to have been ruled out, the official said.

The official said China's latest push for more tariff rollbacks was not expected to derail progress toward an interim deal but noted that it was still possible an agreement would not be reached.

In U.S. economic news, the Labor Department released a report showing a bigger than expected decrease in first-time claims for U.S. unemployment benefits in the week ended November 2nd.

The report said initial jobless claims slid to 211,000, a decrease of 8,000 from the previous week's revised level of 219,000.

Economists had expected jobless claims to dip to 215,000 from the 218,000 originally reported for the previous week.

Meanwhile, the Treasury Department revealed that its auction of $19 billion worth of thirty-year bonds attracted average demand.

The thirty-year bond auction drew a high yield of 2.430 percent and a bid-to-cover ratio of 2.23, matching the average bid-to-cover ratio for the ten previous thirty-year bond auctions.

The bid-to-cover ratio is a measure of demand that indicates the amount of bids for each dollar worth of securities being sold.

Reports on consumer sentiment and wholesale inventories are due to be released on Friday, although traders are likely to remain focused on news regarding a potential U.S.-China trade deal.

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